The Essays of Warren Buffett: Lessons for Corporate America gives an overview of exactly how Warren Buffett runs his corporation. As one of the richest people alive right now, his insights and knowledge have become quite the commodity. Here is a brief introduction to the actual 383-page book.
Warren Buffett condenses his fundamental business values in the opening chapter that covers governance structures of the corporation. In an attempt to remedy executives receiving unearned rewards, Buffett created achievement based incentive program for management. Buffett’s secret to successful investing is to buy companies during a time when they can be sold for less than they’re worth. He counsels to invest in businesses that will show profit over time. In the next chapter, illustrates the practical application of his philosophies across investment areas.
Against popular practice to sell companies stocks at the highest price manageable, Buffett desires Berkshire shares to trade as close as possible to their actual worth for the benefit of the shareholders. He also tells how the company avoids dividends by utilizing the cash generated by the company to increase value for the owners. The company often employs cash rather than stock when purchasing companies.
In the next chapter, Buffett demonstrates the significance and limits of different accounting procedures. He compares and contrasts economic and accounting earnings, accounting and economic goodwill, and book and intrinsic worth.
Buffett’s closing chapter defines the primary purpose of accounting is to present data that answers three questions that seek to determine the company’s true value, whether it is able to meet future conditions and the effectiveness of managers in charge. The last sections deal with taxes.
In his annual correspondence to the shareholders of the Berkshire corporation, Warren Buffett educates America about his very successful business model.